Bank of England’s governor Andrew Bailey says that crypto assets have various limitations that prevent them from being used in the existing financial system.
In a speech delivered earlier this week, Bailey says that crypto assets such as Bitcoin (BTC) and stablecoins fail to qualify as money.
“Let me move on to crypto assets, as another example. These can take two forms currently. What is known as unbacked crypto, of the Bitcoin sort. And, so-called stablecoins – of the Tether, US Dollar Coin sort.
The former have no intrinsic value and are highly volatile and best treated as extremely speculative investments.
The latter, while used as the settlement asset for transactions in the crypto world, are not robust and, as currently organized, do not meet the standards we expect of safe money in the financial system. In particular, both fail the basic tests of singleness and settlement finality. They are not money.”
According to the Bank of England governor, there are “enhanced forms of digital money” which satisfy the basic tests of “singleness and settlement finality.” Bailey says that these enhanced forms of digital money possess the “capability to attach a lot more executable actions, for instance, contingent actions in so-called smart contracts, which could be simple or quite complex.”
On the path forward for enhanced digital money, the Bank of England governor says,
“A third question is whether there is a future for enhanced digital money? The precise answer is that we don’t know, but then we never know the answer to this question precisely for new innovations, that’s the whole point about innovating. In my view, more likely than not the answer is yes there is a future for digital money. Moreover, we must avoid a failure of imagination. Inability to specify a very precise detailed use case today is not a good reason to believe there will never be one.”
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